Luck is a tricky thing. And when it comes to those lucky Americans who have won windfalls in the lotteries, it seems to be short-lived. Winners become losers at breakneck speed.

Studies show that lottery winners are more likely to declare bankruptcy within three to five years than the average American.

In fact, nearly one-third of lottery winners declare bankruptcy, and it doesn’t end there. It’s usually followed by depression, drug and alcohol abuse and estrangement from family and friends.

Still, the average American will be riled by feelings of envious excitement at the stories of lottery winners in the early days when the elation is still real. The most recent story to gain widespread circulation was the March Mega Millions drawing that won an astounding $521 million for a single ticket sold in New Jersey, making it the fourth-largest payout of all time.

The pressure of winning is often enough to send someone into depression, particularly when they are publicly outed and soon to become the best friend of anyone who is hoping for a handout.

That fact alone has led to recent moves to keep their winning identities secret. The winner of the March Mega Millions drawing is a case in point, and it’s not easy. New Jersey—like many other states—makes it difficult to shield your identity because winners aren’t technically allowed to anonymously claim their prizes.

Another massive lottery winning in January in New Hampshire netted a ‘lucky’ Powerball Jackpot ticket-holder $560 million. Citing concerns for safety, the winner requested anonymity and fought and won a legal battle in the process.

But security is only the initial issue faced by lottery winners—many of whom are not equipped to handle a new breed of financing that runs into the hundreds of millions.

For many, sudden wealth is sudden despair. Everything from squandering earnings, making bad investments and falling prey to con artists awaits the winner.

In one publicized case, a West Virginia man won $315 million in a 2002 Powerball drawing and lost it all in about four years. His misfortune reportedly included thieves stealing $545,000 from his car and lawsuits over gambling debts.

“I wish I’d torn that ticket up,” he said afterwards.

It’s a high-stakes game for people who have no experience handling massive amounts of cash.

“The average lottery winner is a blue-collar individual, and all of a sudden you give them tens of millions of dollars and you post their name across the world, and then you expect them to act responsibly — it’s an unenviable expectation,” attorney Andrew Stoltmann, who has represented lottery winners, has said.

Of course, the lawyers and wealth managers are keen to descend on this unsuspecting crop of lottery winners for the lucrative fees but trying to manage sudden wealth alone doesn’t usually bear fruit.

Jason Kurland, who calls himself the “go-to” attorney for lottery winners, claim that most important thing the winner can do is to stay low, avoid publicity and hire a financial planner.

Kurland said lotto winners should assemble a team of professionals who are experienced in for that specific situation, and it shouldn’t just be a wealth manager. Everyone needs to have checks and balances, with that team that includes a lawyer, accountant and financial advisor.

Lottery-based investments also may tend to the high-risk, presumably on the notion that the lucky streak is going to be sustained.

And rather than going on a spending spree, lawyers advise lottery winners to take their winnings as an annuity—not all at once.

Hoarding a massive lump sum of cash is a losing move and taking it all at once means getting less. The latest Mega Millions $521 million turns into $317 million if taken out all at once.

This is one way to beat the bankruptcy forecast.

Another study says that lottery winnings raises the risk of bankruptcy even among the winners’ neighbors by roughly 2.4 percent. Researchers say that lottery winner lifestyle upgrades then tempt their neighbors to boost their own spending on visible markers of prosperity, even though they haven’t had a sudden run of financial luck.

None of this stops anyone from dreaming of winning the lottery, though. Lottery sale profits have consistently risen over the years. By Fred Dunkley, Safehaven.

This is so true. I have been saying to anyone who would listen that lottery winners are the best example of giving more cash to the poor & the working class is not going to solve their problems, they need investment in education, financial literacy, strong families and strong communities. Just giving cash (ahem, UBI) to people who are probably not great at managing money is not going to solve anyone’s problems.

alex in san jose AKA digital Detroit

Apr 18, 2018 at 12:40 am

What worries me about UBI is, OK so it puts a $1000 “floor” under everyone monthly, well, then the cost of housing, food, etc goes up to match that. As an example, when we were on Welfare in the 1970s, the house we were in rented for $700-odd which looking back, was pretty high. There were people who’d buy a lot, move some old plantation houses onto it, and rent ’em out to people on Welfare.

We need to figure out how, say, Denmark does things. Or Germany. You don’t hear about the kinds of problems we have here, happening over there. Maybe it’s just plain heavy regulation.

I know if I won the lottery (not much chance since I don’t play) I’d want to set it up to ration out the money. Also, you’d not think it given my tales of poverty and woe on here, when I was little I was around some fairly wealthy people. And they didn’t seem all that much more happy, mainly they were content. It’s hard to be happy when you’re living hand-to-mouth but buying a lot of stuff is NOT going to make you happier. These were people who were part of the Hertz rent-a-car empire, people with swimming pools, in Hawaii. One lady had an indoor swimming pool. While living in a big house on the shore. In Hawaii. One family had/has a surf-movie and competition empire. They really didn’t seem any happier; the only rather miserable people I’ve known are the ones who are really poor, and members of the “underclass culture” where cigarettes, tattoos, recreational drug use, etc are the main tenets of life. Surprise surprise, these are the people who play the lottery far, far more than the wealthy.

alex in san jose AKA digital Detroit

Apr 18, 2018 at 12:43 am

Actually not just when little. I’ve known some quite wealthy people right up into the present. I fully believe in the theory someone came up with that happiness really doesn’t increase with income past $70k, maybe past $120k here in coastal California.

Setarcos

Apr 18, 2018 at 9:41 am

Successful outcomes are a result of our behaviors, which are grounded in our beliefs. “Success” is personal. For example, my wealth would be poverty to some others, but I get to decide if I am successful (and I know if I am being honest with myself).

When our beliefs are faulty (and no one is perfect), the outcomes MUST reflect this. It is a matter of connecting the dots and recognizing that the ball is always in our court (if we have liberty). It is now very fashionable to point fingers, blame others, blame the system, etc. Those things may well be true, but they obviously fall beyond our control. Of course, there are many blame peddlers who will prey on basic weaknesses in the human psyche.

What we do absolutely control is our willingness to correct our own faulty beliefs. Very few bother … finding blame is very easy and recognizing our faults is hard. Correcting our faults is hard work.

Winning the lottery will not change our beliefs. In fact, it probably reinforces faulty beliefs (I wouldn’t know because I haven’t won).

bfast

Apr 18, 2018 at 12:29 pm

‘Hate to say it but this is comparing apples and oranges. Just because lots of money creates problems, doesn’t mean that a little does. Lots of salt creates problems too, but we need a little.

What about education, do you believe that the poor are better off if they have free education?

Tom Tomko

Apr 17, 2018 at 8:13 pm

As the old saying goes: Easy come, easy go.
A simple cure for all these problems when someone wins big: The maximum amount of any winning ticket should be 100,000 dollars. So in the case of a 500 million dollar price, if you broke that down into 100,000 dollars each, how many more winners would there be? I don’t know. Perhaps someone like Wolf could give us the answer. It’s beyond my math knowledge.

alex in san jose AKA digital Detroit

Apr 18, 2018 at 12:44 am

I like the idea of spreading it out into million-dollar winners. Even a million isn’t that much money but it’s enough to be “life changing”. I know if I won a million, I’d not have to work again and I plan on living to be pretty old.

robert

Apr 18, 2018 at 7:41 am

NO one would play

alex in san jose AKA digital Detroit

Apr 18, 2018 at 2:56 pm

Less dumb people would play and a bit more smart people would. 200 million jackpot, that’s just a dream. 200 million-dollar jackpots, wow my odds of obtaining life-changing money has increased 200X.

dannyb

Apr 17, 2018 at 8:42 pm

Always amazed that few take an annuity and just live off that…who needs to make any investments?

MC

Apr 18, 2018 at 12:49 am

I agree taking the annuity would be the better choice in most cases, but there is a serious counterparty/credit risk: the lottery companies buy annuity contracts from insurance companies (often not particularly solid ones), though in the event of default the lottery company remains liable for payments to winners. Would you lend what is now near 100% of your new net worth to just 2 counterparties for decades? I wouldn’t.

F Vevaina

Apr 18, 2018 at 5:30 am

Annuities seem a good idea until the financial institution goes bust.

JD

Apr 18, 2018 at 9:57 am

Or the government does …

c smith

Apr 18, 2018 at 11:38 am

“…taking it all at once means getting less. The latest Mega Millions $521 million turns into $317 million if taken out all at once.” The discount is simply the time value of money, measured (typically) by the corporate bond rate, minus some fee to the insurance company. ALWAYS take the lump sum, because managing it yourself in a portfoiio of equities will ALWAYS leave you better off over time. Can’t believe the author wrote this.

alex in san jose AKA digital Detroit

Apr 18, 2018 at 2:57 pm

Yep put it into Vanguard funds.

B Fast

Apr 19, 2018 at 10:07 am

“ALWAYS take the lump sum, because managing it yourself in a portfoiio of equities will ALWAYS leave you better off over time.” Balderdash. Real people don’t save. Real people are gluttons. The proof is in the main article.

If a good saver comes to me for advice about his recent wealth, I might agree with you. If someone has no history of saving, I would recommend against taking the lump.

Seen it all before, Bob

Apr 18, 2018 at 3:27 pm

“Hoarding a massive lump sum of cash is a losing move and taking it all at once means getting less. The latest Mega Millions $521 million turns into $317 million if taken out all at once.”

I’m a saver and try not to be a hoarder :-)

$317M turns into $726M in 30 years in a 2.8% 30 year US Government T-Bill today.

Trusting the Insurance company’s health over 30 years that they would keep paying me is frightening.

The same is true for the T-Bill above but less frightening since the US government has been around much longer.

I’d take the lump sum $317M, quit my job, and spend full time managing it across 30 different investments. Stocks, bonds, RE, bitcoin. Any idiot should be able to do better than 3% on average.

However, in the short term, I’d likely hire a security guard to keep kidnappers, thieves, “friends”, and “family” at bay.

One can dream.

Seen it all before, Bob

Apr 18, 2018 at 5:03 pm

Since this post has caused me to dream……

317M at 3% will generate $8M per year in interest. I will take $2M out to pay myself per year (I can’t ever need more than that… right?) and will re-invest the remaining $6M.

$2M per year should cover a few nice vacations and maybe allow me hire someone for the list of honey – dos that seem to be piling up.

My winning fortune will continue to grow and my family will become a dynasty long after I am gone. Unless my kids are part of the 1/3 that goes bankrupt.

Cato

Apr 27, 2018 at 11:52 am

I agree w MC completely, and was taken aback when I saw in the article that lawyers recommend taking the annuity. would you trust Illinois to pay you in 20 years? I was an article exactly on point (i don’t know where) and either a local or state jurisdiction failed to pay their lotto winners.

2banana

Apr 17, 2018 at 8:47 pm

Same issue with professional athletes.

After making millions…

Most are broke 5 years after “retiring”

Michael Fiorillo

Apr 17, 2018 at 9:12 pm

And, depending on the sport, many of them are also physically broke…

Night-Train

Apr 17, 2018 at 10:36 pm

True. And I was shocked the first time I read that. I live in a town with a successful college football program (National Championship caliber). And we put out quite a few players each year to the NFL. I know the program tries to counsel these early twenty somethings on money management, but you can’t make them do anything.

William Smith

Apr 17, 2018 at 11:17 pm

Jocks are a special breed of semi-retardation. Are they curing cancer, creating great works of art or contributing to science? No. None of the above. It is wonderful to see them inevitably fall off the egotistical pedestal that they have been put on simply because they are proving the laws of physics by knocking some ball and each other around. They are arbitrary “winners” in Evolution’s lottery much the same as the random state lottery winners. Evolution bequeathed them some attribute such as height or speed which allows them to knock the ball better than the next neanderthal. Same as the lottery winners, most of them have not earned it and therefore cannot possibly treat their “winnings” with the respect, cunning and care needed to manage and conserve them. Any maths greater than keeping score is completely beyond them. Thus they are “taxed” for their lack of math/financial ability by self induced hair cuts. Gambling is a tax on the mathematically illiterate: even if they win, they lose. The casinos know this that is why they try to keep the suckers there long enough (free booze, food etc) to lose everything: which maths proves is an eventual certainty.

NoEasyDay

Apr 18, 2018 at 6:51 am

Well said.

Dan Romig

Apr 18, 2018 at 7:26 am

In general, pro hockey players are the exception to this. Most in the NHL come from backgrounds that are quite different than many of the athletes playing in the NFL and NBA.

Pro football (soccer, that is) has quite a list of tax-avoidance stories, not the least of which are Ronaldo, Messi and Neymar Jr. A couple of years ago, Neymar, then age 24, had some problems with Brazil over taxes. Imagine the anguish of having your private jet, your yacht and a few luxurious properties confiscated by your native country!

It seems like you were bullied and have deep rooted issues. Possibly, there is a systemic problem in this country such as making the almighty dollar the most important object in life without any training. If the dollar is the only thing that is important (for success, status, happiness…), than maybe we should teach children at an early age to be responsible but there is no such thing as it is taboo to discuss unless you grew up in a Jewish family and it is the opposite problem as I have first hand knowledge.

Blergiton

Apr 17, 2018 at 9:22 pm

Have to mention there is a great episode of the American history podcast The dollop hosted by two comedians I think from memory it was called America’s worst lottory winner. It chronicals also in a humorous/watching a train wreck kind of way how a guy who had nothing won a huge jackpot and blew it all. Worth listening to, funny but terrible if that makes sense.
Anyway love this website, thanks for the time and effort you put into making it so great.

I’m speculating that they DIDN’T go bankrupt.
Hmmm. I think I will take those odds as well.
Spend a couple of bucks and have a one in a billion (?) chance to be wealthy.
If you beat those odds, you have a ~67% chance that you won’t go bankrupt.
Yep, I’m okay with that.

What you say is what I have been thinking as I read the posts/comments here, today.

I have said in many of my prior comments, that there are two kinds of people in the financial domain, spenders and savers. A pretty good generalization that can frequently help one to understand the arc of a person’s life (not always ) .

I know many people that I call ‘inveterate savers’. Were they to “stumble” upon some millions, they would (i) pay off the mortgage immediately, for that is certain security, (ii) maybe buy a new Honda or Chevy or Ford (not a Maserati) (iii) indulge in a small one-time pleasure (a vacation maybe) (iv) conservatively invest or otherwise save THE BULK of what remains and (v) take a reasonable periodic allowance.

NONE OF THAT IS UNUSUAL, for that is how ‘born in the blood savers’ choose to live.

Spenders ? Well, I have known many, and I am not able to understand them well at all. I won’t enumerate what they would do with newfound millions — but it is obvious from this post and comments, that they would spend spend spend, maybe a huge house, maybe a car beyond their means, who’s to say ?

I took a lot of Psych and Sociology classes long ago. Many of the social experiments I studied rang true — and their lessons have stuck with me until this day.

HERE’s one: Take a group of youngish children, and place a tootsie roll on the table in front of them. TELL THEM THIS, “You can have one tootsie roll now — or if you prefer, you can wait five minutes without touching it — and get two !”

Two of the many results stood out: (1) How hard some of the subjects tried to avoid eating the prize, the straining, the wiggling, the gyrations. Many, of course, would fail and quickly take the prize. (2) The second thing I remember, and here is the point of the study, is that the ability of the children to ‘save’ the prize for five short minutes, and to earn interest on that ‘savings account’ was an excellent predictor of the arc of the child’s life as time passed.

Ultimately, “deferred gratification” is really a savings account of sorts, in its most general sense. Defer ‘consumption’ now, until later– and ‘consume’ more later.

Finally, it has been my observation that savers are born and not bred, but that is just a lifetime of observation talking.

Here, I was able to find a link to the study/experiment — and it is largely what I remember it to be 45 years later :

You need debt to go bankrupt. The lottery winners must have spent their winnings, and then some.

Rates

Apr 17, 2018 at 10:45 pm

How about the other 2/3rds?

Night-Train

Apr 17, 2018 at 10:50 pm

“Another study says that lottery winnings raises the risk of bankruptcy even among the winners’ neighbors by roughly 2.4 percent.”

This gives new meaning to “keeping up with the Jones’s”. Just another aspect of conspicuous consumption. I remember very well off folks in my little town, that lived comfortably but not grandiose lifestyles, no matter how much wealth they had. Conversely, working in a hardware store while I attended college taught me that some folks who lived like royal princes, owed and were being dunned by every merchant in town.

caradoc

Apr 18, 2018 at 1:37 am

Emotional and spiritual emptiness is at the core.

It is related to how people handle wealth from whatever source as well as how they handle lack of it too.

People in the right place internally will have many fewer problems whatever comes their way and handle the externals too.

Cameron S

Apr 17, 2018 at 11:44 pm

Wise old quotes …………

“Ä fool and his money are soon parted”

As true now as it ever was.

There are numerous stories of large lottery winners who lost it all. Give these kinds of people $1000 or $1 million. They will lose it either way.

Lee

Apr 18, 2018 at 2:20 am

You Yanks just don’t know how to do it right!

Winning the lottery in the USA means that first Uncle Sam wins big and then the State your are in (if they have State income tax) is the second biggest winner.

Here in Oz the winnings from the lottery are tax free.

And here the people that play the different lotteries are soooooooooo lucky that the Australian Powerball has had to change the way the game is played. People were winning the first prize too often and the jackpot amounts were just too small.

So to win the first prize now you need 7 numbers instead of six and the powerball.

With the new changes the chances of hitting the winning number are now much more difficult. Don’t worry though somebody will still win the first prize against the odds.

Some of the other lottery games have sometimes had 10 winners divide up the normal first prize. And on “Mega Draw” days when the jackpot is around the A$20 million area there are usually around 20 winners that hit the numbers.

Yes, Australia really is the lucky country!!!

hendrik1730

Apr 18, 2018 at 3:24 am

Simple. Who participates in lotteries? Who is a “top” sporter? Voltaire stated ( correctly ) that a lottery is a tax on stupidity. Top sporters may have more muscles than you or me, but that’s about it, their “strength” does not reside between their ears.

So, estimating the IQ of said “winners”, it is substandard and within a few years, consequently those “winners” end up somewhere in a gutter.

raxadian

Apr 18, 2018 at 3:33 am

Most people who are okay living with little money have no clue what to do if they suddenly find themselves with a lot of money.

Not to mention the vultures that go after them.

Lottery prices should all be deposited in the winner bank account if he ir she has one.

Having to actually go to the bank to retire money and or being faced with daily expending limits would greatly help.

X-Pat DE

Apr 18, 2018 at 4:37 am

Millions forcibly transferred into a bank account where the account owner is only allowed to withdraw meagre amounts and where the deposit insurance covers €100K “would greatly help”? Would help whom?
Like letting the foxes guard the hen house!
You must work for the banks or government!

raxadian

Apr 18, 2018 at 11:26 am

Considering that the alternative is having millions of dollars in cash?

Of course if you live in Spain or Italy trusting a bank is stupid since there they are falling like mayflies.

Then again, even people who is careful with their investments can still lose everything.

What would you do then, a time deposit? Buy Apple and Microsoft stock? Buy gold and silver shares? In today economy there is no such thing as a truly safe investment.

A ten-unit apartment building in a good location will always pay inflation-adjusted returns as rents usually track inflation. (You must be capable of the administrative, maintenance and documentation tasks, of course).

Yet there are many that have different risk-profiles, diversification characteristics and return spectra . That is a research project for the “winner”– and her accountant, attorney and financial adviser. And perhaps family/friends if there are good & trustworthy people in one’s circle.

NEVER FORGET THIS ONE, not a big one, but certainly a necessary one : Some proper amount of well hidden and still accessible folding cash. Tens, 20-s, fifties and 100-s too. The amount is dependent on the size of the jackpot.

“Invest”here was a vanilla term that I chose, meaning only, “to put your money in a place”. But I could have been clearer for sure.

But let’s be really clear, NO MATTER WHAT YOU DO WITH MILLIONS OF DOLLARS, it is always an investment ! ! !

CD-s ? You can spread it around to many banks to minimize default risk, but you are still “investing” in the banks itself. And FDIC insurance will not cover many millions of dollars.

CASH ? No, not a likely or even possible choice.

Money Market Funds ? An investment for sure.

Savings Accounts have the same risk as CDs !

Bonds ? An investment too.

An Annuity ? An investment in the Insurance Company or whatever !

T-Bills ? An “investment” in the USA and its ability to avoid default.

MONEY CANNOT BE PARKED in a risk-free place. Period. Case closed.

It must be placed in some kind of “investment” “container” — and there is not one of those available sans risk ! I might have qualified my use of the term “invest” — but there was no real need, as all “park your money” choices are ultimately investments, no matter how apparently low the risk.

Oh yeah, I neglected to include Gold or Silver in my list above. Diamonds anyone ?

BTW, even if you could park it all in greenbacks, it is still an investment — as there is all of that pesky unknowable inflation risk.

I’m fairly certain hiring a money manager would be one of the first things.

FDIC insurance only covers a certain amount, $250k? Or is it more like $100K? How well are you covered with Vanguard funds? Or shares of Berkshire Hathaway?

As for swish banks, I’m not sure how much it matters if the tellers are light in the loafers…

ML

Apr 20, 2018 at 12:44 am

“What would Wolf Street readers do with millions of dollars?”

I’d divide the total amount by my estimate of the number of years I expect to be alive for. Depending upon the sums involved, I’d estimate how much money I ‘d need to live on for that duration and double or triple that estimate to allow for inflationary n and rising costs. That would would be set aside. The rest I would fritter. Fritter to include moving house if I wanted. Also, currently I don’t drive myself for long distant journeys, but have a driver and travel in his car. He drives for others too. I have told him that if I win the lottery then I’d give him enough money to buy a newer model of his car on condition that I could call upon him to drive me whenever and without my needing to pay; he would still drive for others.

I wouldn’t give anything to charity but I might set up my own charity so I could get to decide the cause to donate to.

I would of course continue to play the lottery in the hope of winning.

Here in UK we have premium bonds. A government backed organisation, National Savings and Investments. Each bond costs £1 GBP, maximum holding £50,000. Capital is not at risk, apart from inflation and can be withdrawn at any time. The NSI sets the amount of interest, currently I think it is 1.4%. No interest as such is paid on a bond. Instead, every month is a random draw for prizes – tax free – the number of prizes distributed in the range £25 to £1 million (with 2 £1M prizes and some 25 million at £25, and intervening prizes at £50,£100,£500,£1000,£5000,£10000, £50,0000,£100,000. Currently the odds are about 24000 to 1. Last month’s £1M winner had bought £7000 bonds in January: good return on the investment.

Ace Bragg

Apr 18, 2018 at 5:10 am

Not surprising. I think you only need to look at the financial makeup of those that play the lottery to begin with. I doubt there are an abundance of millionaires or even upper middle-class people playing the lottery. I’d be willing to bet that most people playing the lottery on a regular basis are financially illiterate. Adding more money to that fire doesn’t extinguish it, it feeds it.

Enrique

Apr 18, 2018 at 5:16 am

Lottery participation is stupid, but some of this reads as paternalistic tripe. Oh yes these WORKING CLASS people just cannot be trusted to look after their own affairs….

I wonder if some of this is an offshoot of the effect under which people in general below a financial threshold are a bit insecure economically. Then when you get one level higher you are not. But then, when you go one level higher than that you feel compelled to try to shoot for billionaire status or whatnot. That’s what leads to all the bad decision-making.

Or put another way, the next successful doctor I know that isn’t an utter disaster financially will be the first. These guys all seem to have debt on top of debt on top of debt. And usually related to this, that, or another moronic business venture unrelated to their having won professional society’s lottery.

raxadian

Apr 18, 2018 at 7:04 am

Well, we do have a lot if success stories of people who go from rags to riches and stay there but hardly any of those are from lottery winners.

If you have absolutely no clue what to do with a lot of money, keep it in a bank saving account, and move you and your family away to somewhere no one knows you.

Lottery winners with some common sence and moving away to escape vultures.

RangerOne

Apr 18, 2018 at 8:18 am

Most people following a finance blog would likely do very very well with a lottery windfall.

It let’s you firm up every standard investment. Then you can look at dabbling in housing, or being a VC.

Though I would guess most of us don’t pay the lottery tax. So its not a realistic dream.

robert

Apr 18, 2018 at 7:41 am

NO one would play IF JACKPOT WAS 100K

raxadian

Apr 18, 2018 at 11:30 am

Actually, yes they would.

There is an amazing lot of people who play lottery like games were the jackpot is comparatively small. Heck there was one years ago who only have you 10.000 bucks at most but tickets costed like 50 cents. It sold like hotcakes.

Setarcos

Apr 18, 2018 at 8:12 am

If memory serves, a former Dallas Cowboy won the lottery TWICE. So he lost 3 fortunes.

Setarcos

Apr 18, 2018 at 8:12 am

Hollwood Henderson maybe?

Ace Bragg

Apr 18, 2018 at 3:58 pm

Yep.

KFritz

Apr 21, 2018 at 2:30 pm

As of 2011, Henderson is NOT bankrupt. He ruined his pro career with crack cocaine. He was better than solvent when he won the lottery. Check his Wikipedia article and link to the 2011 Las Vegas Sun article. He even played in Michael Jordan’s celebrity golf tournament.

Winston

Apr 18, 2018 at 8:56 am

Why? Probably because if they were smart and good at handling money, they wouldn’t feel the need to buy extreme-long-shot lottery tickets to improve their low economic standing most likely resulting from NOT being smart or good at handling money.

It would be interesting to see if there is a correlation between a winner’s income before winning the lottery and the likelihood they’d eventually declare bankruptcy afterwards. I’d bet there is. Stupid is as stupid does.

RD Blakeslee

Apr 18, 2018 at 9:06 am

Sudden wealth from any source, an inheritance, maybe, carries with it great burdens.

Those wise enough to realize that deal objectively with the burdens and are not overwhelmed.

alex in san jose AKA digital Detroit

Apr 18, 2018 at 3:06 pm

I got an inheritance of $10k. I paid off the last of my student loans, bought my first car, and bought some sports equipment that was important to my sport career at the time.

I may have bought a few Whoppers from Burger King and the odd Coke with milk in it (it was something I was fascinated with at the time, but it’s really not great).

DK

Apr 18, 2018 at 9:07 am

A fool and his money are some party

Steve clayton

Apr 18, 2018 at 9:23 am

Hi, being from the UK please can somebody explain to me how 521 million dollars drops to 317 million if you took the cash. 40% Tax charge? UK lottery wins are tax free but sometimes but low amounts the Euro millions lottery can get to 100 million. That’s one big party to spend 315 million in 4 years.

First priority is to put the money where it will do some good. That’s not as easy as it sounds, but self gratification is the worst decision. The first stock I bought, the broker talked to me half an hour about world hunger and poverty. I bought some Texaco. Now I am at the other end of my life, and it’s still hard to make that decision, but I have been thinking about it a long time. It’s when winning the lottery is the first stock you bought that things get messy.

James

Apr 18, 2018 at 10:16 am

That 17 year old kid that won 500 million a few weeks ago is in for a rude awakening. His parents and siblings will forever be whining about how they need more money. And that is after he sets a limit on how much they will get. Never tell anyone if you win the lottery.

Daniel J Bjorndahl

Apr 18, 2018 at 10:58 am

Yes, it seems as a decent rule of thumb to keep good news and blessings private…

MASTER OF UNIVERSE

Apr 18, 2018 at 12:02 pm

I would never allow anyone to manage my money even if I had money.
Common sense would likely be enough to avoid the pitfalls of a lottery win. As one that was raised by a CA, I rather doubt that I would squander any money whatsoever on an accountant, or lawyer, or financial planner.
I would invest in land & RE Commercial & Residential. Then I would collect rentier income for the remainder of my life whilst claiming tax deductions on building upkeep so that my profits are not siphoned off by foolish investments that don’t pay for their cost over time.

I pay Idiot Tax once a month based on not listening to my third year Statistics professor back in my university days. He explained the Probability of a win from a stats perspective. And I realized that even suckers get lucky sometimes so it’s better to dream BIG.

Not good odds I must admit.

MOU

Kasadour

Apr 18, 2018 at 12:23 pm

I’m usually not a religious type person but I thought of this bible verse:

1 Tim 6:3 “The love of MONEY is the root of all sorts of injurious things, and those who reach out for that love stab themselves all over with many pains.”

Isn’t that true. Keep enough to get out of debt and take a vacation, and donate the rest to charities.

Rates

Apr 18, 2018 at 2:06 pm

LOL at the self delusion. You guys do realize this is only one third right?

If you have a 1/3 change of getting run over by a car when you cross the street, would you cross the street?

Rates

Apr 18, 2018 at 3:03 pm

That’s not a good question and you know it. Crossing traffic and winning the lottery are very different things. Buying options is supposedly a losing man’s game too i.e. 10% winning percentage, but we all know what matters is expectancy not percentage of winning i.e. how much do you win when you win plays a part as well. Same here too if the other 2/3rds are having a significantly better life, than it’s not a bad tradeoff.

Now about life changing events. Global warming is now pretty much a certainty. Would I and the rest of the muppets continue to do things that contribute to the worsening of the problem although we might have children that suffer? The answer is yes because “I’ll be gone, you’ll be gone”. So asking questions like: “would you do something with a high probability of hurting someone you love?” is useless because we are obviously doing it.

And finally there’s life itself. We don’t control the day we die. It could be today or yesterday or whenever. There’s some value in saying, the chance of me dying to day is close to zero, because otherwise we’ll never go out or drink coffee, but let’s be real, we don’t really know the percentages.

Sometimes we do things because we must (crossing the traffic in 3rd world countries) or it’s in our nature. Otherwise the casinos will not be rolling in money.

It was a very good question to point out how silly your comment was. A 1/3 probability is HUGE when your well-being is at stake.

Here’s the thing: EVERYBODY wants to be in the 2/3 that’s doing great afterwards. But they cannot be in it. 1/3 gets rolled. That’s the risk (probability).

That’s why your efforts to brush this risk off is silly. You cannot brush it off. It exists. And 1/3 of the winners get rolled.

PJM

Apr 18, 2018 at 4:48 pm

Boon or Bust?
I enjoyed the comments above. Seems that buying a lottery ticket is a boon to our government (through taxation), to large financial institutions (fees), to legal and accounting institutions (fees), to con artists and grifters (thieves), to extortionists, and a boon to many other hidden entities that wish to relieve winners of their windfall. But the reason of the initial purchase of the ticket is not about any of these quiet elements. I believe that buying the lotto ticket is about hope, when there seems to be none. The success of the lotto business is testimony to the millions of people in America that want to do more, and hope to change their course with a miracle. Though the odds are unfathomable against the ticket holders. Hoping to help themselves and others with a very small initial investment. Nothing to lose. Great for the economy and great for the quiet elements. Sounds innocuous.

Be it as it may, great wealth obtained to do evil is bothersome and lotto winning distributions are wanting before funding a misanthrope. Being wealthy holds a special responsibility to humanity. Example: How many weapons of mass destruction could you obtain with hundreds of millions of dollars? Nothing good comes from funding an evil psychopath. Any suggestions? Or are the quiet elements overshadowing common sense?
How do we confine this extraordinary lotto game winning ticket within the bounds of beneficence? An idea worth pondering.

steve

Apr 19, 2018 at 7:51 am

This is more about how badly run the lottery is, in the UK:

1. You can be anonymous and most are, most of the big winners we know nothing about.
2. They arrange a new head office bank account, no local staff finding out
3. They arrange meetings with a single vetted wealth adviser, who teaches you how to invest the money and not lose it.
4. and of course its tax free

Lee

Apr 19, 2018 at 7:55 am

In my earlier post about how too many people were winning the Australian Powerball and the changes to the lottery I indicated that no doubt, Australia being the lucky country, someone would ‘beat the odds’ and win first prize……………..

Well they just had the draw tonight and there was ………………

one winner who hit the $8 million jackpot.

The odds of winning were 134 million to one for one game.

The previous two winners of first prizes under the old game were on 22 March with two winners who split the $20 million prize and 6 April with one winner who got lucky with a prize of $6 million.

So there you have it: 4 Powerball winners in the period 22 March to 19 April.

But how the heck am I supposed to buy my dream mansion with staff overlooking Bondi Beach when I only get $8 million? That’s an outright dream-killer. $8 million won’t even buy a decent 4-bedroom penthouse with double-height ceiling :-]

Lee

Apr 20, 2018 at 2:04 am

Well Wolf, I suggest that you forget about coming to the lucky country and try………………Japan!!

For A$8 million you could buy a really nice house in one of the big cities and a couple of other properties as well – a summer house or condo in Sapporo and a nice condo along one one the beaches – Atsumi or even in Chiba Prefecture and you’d still have a bunch of bucks leftover. Forget that California lifestyle and head back to Japan.

If Japan is no longer your cup of (green) tea then there is a nice property for sale in the BVI:

Just goes to show you that you cant fix stupid. The lottery is a tax on the stupid to start with. So those that win aren’t going to be the sharpest of sorts anyway.

Citizen AllenM

Apr 19, 2018 at 11:11 am

Winning the lottery, getting an inheritance. Unexpected wealth dealt with by many psychological tricks. One of the most interesting is the sudden generosity inspired by this wealth. The potlatch effect of sharing with one’s tribes is fascinating.

The example of the West Virginia contractor is spectacular, but the most interesting part is the winners that we don’t hear about- their silence is interesting.

Further, one of the hardest things to imagine is the dissipation of wealth- a lot of the time what was thought of as huge wealth is today just a living wage due to inflation. And wealth, unless it is safeguarded through the teaching of stewardship will fritter and disappear, and sometimes through attempts to keep winning through further long odds gambles.

The gambler’s curse is real, and yet casinos get bigger and bigger, temples to hope and graveyards in reality.

As was pointed out above, the readers are a very self selected bunch. I once polled an economics department faculty, staff, and grad students about whether they buy lottery tickets when the expected value exceeded the dollar spent- most of the faculty would not buy, even when an overall return was guaranteed. The grad students were also reluctant to invest in a positive return, but the staff played at the rate expected in the general population.

My take that they violated perfect rationality was not enjoyed with good grace. Since then the research has shown that exposure to rational choice theory tends to make persons attempt to be more rational in their choices.

The other interesting thing is the time horizon issue. My horizon is thirty years or less, so I might just take the annuity, spend my income, and leave the balance to my heirs.

Why not?

After all, thinking one can have perfect safety is an illusion, and thinking that investments may pay out with any certainty is the biggest illusion.

Know enough people who are now gone, their decisions moot, one begins to see that life should be lived as well as possible, and not to worry excessively about the future.

Unless of course we have a big famine, then the obsessive northern european hoarding genes look like a good bet to have food stockpiles…..

Lee

Apr 19, 2018 at 2:51 pm

Wasn’t there a recent change to USA lotteries in that previously when a person took an annuity, if the person died, the annuity also went up in smoke as well?

ML

Apr 19, 2018 at 11:52 pm

“most important thing the winner can do is to stay low, avoid publicity and hire a financial planner. Kurland said lotto winners should assemble a team of professionals who are experienced in for that specific situation, and it shouldn’t just be a wealth manager. Everyone needs to have checks and balances, with that team that includes a lawyer, accountant and financial advisor.”

Ome of the quickest ways to lose money is to allow others to get their hands on it and arrange things for you.

My work involves advising multi-millionaires. I’d advise a big-time lottery winner to go on a course to be educated how to handle large amounts of money and live with yourself. Having got the basics, the person would then be better equipped to avoid the obvious mistakes.

KFritz

Apr 21, 2018 at 2:33 pm

Federal Deposit Insurance limit is $250K per individual insured per separate and distinct institution. The description is my interpretation of information from this FAQ page.